The deal was signed in London last week, ending a year of negotiations and months of speculation that the contract would not be renewed.
It will see Australia’s sporting capital host the global motorsport event until 2020, which will mark the 25th
running of the Melbourne GP since it succeeded Adelaide in 1996.
The agreement guarantees the Melbourne race will remain the first of the season in each year from 2016-2020.
Victorian Premier Denis Napthine has ruled out the race being held at night.
Napthine would not disclose the cost of the contract, but labelled it “a fantastic deal for Melbourne and Victoria”.
“This delivers enormous jobs and economic benefits to our state and reaffirms Melbourne and Victoria as the sporting and major events capital of the world,” Napthine told reporters.
The government says the event creates up to $39 million for the economy and around 400 full-time jobs every year.
Last year’s Grand Prix cost the state’s taxpayers more than $50 million.
Melbourne will host the opening round of the 2015 Formula One World Championship on March 12-15.